The Swiss economy is gathering strength, giving labor
unions room to push through higher wages as borrowing costs near
zero fuel property demand. Economists have argued that the SNB
won’t risk hurting an export-driven recovery by raising rates
and making the Swiss franc more attractive to investors.

The Swiss currency’s strength is “seen as restraining the
SNB as monetary tightening would likely further boost the
franc,” the UBS analysts said in the note. “We believe the SNB
will put the emphasis on the risks of overheating in the
domestic economy as opposed to the damping impact of a strong
exchange rate on the external sector.”

The franc strengthened to parity with the dollar for the
first time since December today, trading at 1.0047 at 2:29 p.m.
in Zurich. It appreciated 0.8 percent versus the euro, bringing
its gain to 13 percent this year.

Keeping borrowing costs on hold would have a “limited
impact on the franc,” while an increase or a “hawkish
statement” could push the Swiss currency toward a Sept. 8
record high of 1.2766 versus the euro, UBS said. The analysts
see the franc at 1.30 over the next month and over a three-month
period.

The SNB, led by Philipp Hildebrand, will publish its
decision at 2 p.m. in Zurich on Sept. 16.